Under the new framework, leveraged loans exceeding collateral value are prohibited. Interest rates are capped at 20%. Additionally, lending is allowed only for the top 20 cryptocurrencies by market capitalization or coins listed on at least three licensed local exchanges. 

New Rules for Crypto Lending Services 

The FSC stated in a press release that the guidelines reference global cases and define virtual asset lending clearly. The rules also include enhanced user protection measures. 

Products requiring users to repay loans in cash are restricted, as they violate existing credit regulations. Furthermore, companies offering lending services must use their own capital. Third-party services cannot be used to bypass these rules. 

The guidelines require lending limits based on user experience and transaction history. Moreover, investors must be informed in advance if their positions face liquidation risks. This ensures users avoid sudden losses. 

Implementation Overseen by DAXA 

The new rules apply only to selected cryptocurrencies. If a coin is flagged as a precautionary measure by exchanges, lending services for that asset must be halted. 

The FSC confirmed that the Digital Asset Exchange Alliance (DAXA) will monitor compliance. The commission plans to legislate the rules based on implementation results. 

The guidelines follow the August 19th suspension of credit services at local exchanges. Platforms like Upbit and Bithumb had launched various lending products. However, FSC’s directive required them to halt these services. 

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Unbacked Crypto Loans Powered by World ID

Since December, Divine Research has issued approximately 30,000 short-term crypto loans, primarily under $1,000. These loans are made in USDC, a stablecoin, and the company uses World ID to ensure that borrowers cannot create multiple accounts after defaulting on loans. This provides a safer lending process, especially for overseas customers who are often underserved by traditional financial institutions.

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Diego Estevez, founder of Divine, told the Financial Times, “We’re loaning to regular folks like high-school teachers, fruit vendors, essentially anyone with internet access.” Estevez added that the interest rates, ranging from 20% to 30%, are necessary to offset the risk of default, which has been reported to be around 40%.

Opportunities for Everyday Investors in Crypto Lending

The growing platform allows everyday investors to participate in high-risk crypto loans. Estevez pointed out that, “Anyone can provide liquidity. We’ve engineered the system such that after accounting for default rates and interest rates, providers will always make a profit.” This presents a new avenue for regular investors to engage in the crypto economy.

As Divine Research and other crypto lenders like 3Jane capitalize on market momentum, the landscape for unbacked loans continues to evolve. 3Jane, for instance, raises funds based on asset verification but still does not require collateral. The platform plans to use AI agents to automatically follow lending rules and reduce rates.

Crypto Lending Is Gaining Traction

Despite its current small market share, crypto lending continues to gain attention, especially with institutional players reentering the space. Recently, JPMorgan began exploring Bitcoin-backed loans, signaling a growing acceptance of digital asset-backed credit. However, the collapse of major platforms like Celsius and Genesis in 2022 remains a cautionary tale for the industry.

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The Trump administration adopted a more flexible and regulatory approach toward crypto assets in the U.S. JPMorgan will work with third-party custodians like Coinbase to strengthen risk management for crypto-backed loans. 

CEO Jamie Dimon’s Stablecoin Emphasis 

JPMorgan CEO Jamie Dimon maintains a skeptical stance on Bitcoin. In a statement to investors in May, he highlighted risks such as leverage, misuse, and money laundering associated with Bitcoin. Dimon stated that the bank does not plan to offer custody services for crypto assets. 

He said, “We will allow you to buy crypto, but we won’t hold it,” linking this approach to his personal views. 

This statement reflects JPMorgan’s cautious yet strategic approach to crypto assets. While participating in stablecoin and other digital asset projects, the bank remains prudent in riskier areas. 

Using Crypto Assets as Collateral 

With crypto assets accepted as collateral, the value of digital assets will directly influence customers’ loan processes. JPMorgan aims to offer more flexible and innovative credit options. The bank is also expected to strengthen its position in digital asset markets with this new application. 

Meanwhile, JPMorgan will closely monitor the impact of market volatility on credit risks. Risk management strategies will be tailored to this new loan model. Additionally, crypto-collateralized loan options will enhance financial flexibility for investors. These developments will further increase the importance of digital assets in the banking sector.

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“If you’re mining Bitcoin, you already understand why this asset is valuable long-term,” Glover stated. “You don’t want to sell it.”

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This debt-based approach is similar to strategies used by companies like MicroStrategy, which raise capital through debt and equity to acquire BTC and profit from the currency divergence.

Rising Competition, Falling Margins

The BTC mining hashprice, a key profitability metric, has plummeted due to increasing network difficulty. As more powerful machines are deployed, costs rise and profit margins shrink.

Adding to the pressure, U.S. trade tariffs on tech imports are inflating prices of essential mining equipment like ASICs. These conditions threaten the viability of smaller operators in the sector.

In March 2025, miners collectively sold 40% of their mined supply—marking a trend reversal since the April 2024 halving and the highest monthly liquidation rate since October 2024.

BTC-Backed Loans May Be A Lifeline

In such a climate, Bitcoin-backed loans could be a strategic lifeline. They offer operational liquidity without sacrificing long-term asset value.

As Glover noted, “If you believe BTC will rise, why sell it now and lose future upside?”

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